MENA new construction project awards crash 61% in April due to Arab unrest
Posted on 12 May 2011 with no comments from readers
The Arab unrest, revolutions and civil wars that started in January are having a dramatic impact on the workload of contractors across the Middle East and North Africa, with new construction project awards falling by 61 per cent to $5 billion in April, according to new data published by Citi.
Indeed, Citi notes that the largest market, Saudi Arabia awarded only $457 million of projects in April compared with a monthly average of $2.4 billion. Saudi Arabia accounted for 31 per cent of projects awarded in the first four months of 2011.
Backlog shrinks
Projects planned or underway in the GCC States are down 18 per cent to $1.9 trillion, with Kuwait and the UAE showing the largest year-on-year declines of 43 and 35 per cent respectively.
Some $1.3 trillion worth of GCC projects have been cancelled upto the end of April. It is always impossible to judge the strength of a construction market by a couple of months of orders.
However, the danger is clearly that the Arab Uprisings as they have become known become the ‘new normal’ for the region. If so then the implications for the construction sector are horrendous, and the April figures are an indication of what that means in terms of lost business opportunities.
For revolutions normally bring recessions and not expansions in business activity. It is clearly true that while governments under such circumstances might want to advance new projects there are practical constraints to executing projects when there is shooting on the streets in some countries.
Practical issues
Key expatriate staff may be unable or unwilling to travel. Supply of construction materials may be difficult. Government ministries and payment channels may be in disarray. There are many reasons why construction stalls under such conditions.
For private developers this is also hardly a time to begin new real estate projects. Given that construction has been a powerful employer and driver of regional economic growth this is very bad news.
It is also somewhat ironic that by protesting for better social and economic conditions the immediate effect is to make things worse and not better for those same protestors. Recessions and revolutions are always bed fellows.
The boom will only come when the fighting stops and the rebuilding begins. The ArabianMoney newsletter did not share local analysts’ convictions about construction stocks being the thing to buy a couple of months ago and feels vindicated (sign-up here).
